Fraud in benefits claim relieves insurer of granting insured of benefits: Alberta Court of Appeal

The Alberta Court of Appeal upheld the common-law-fraudulent-claims rule, stating that misrepresentation or fraud in a Section B SPF No. 1 claim relieves insurer from indemnifying or granting an SEF 44 benefits claim.

Ali Abbas was injured while he was a passenger in an automobile operated by an uninsured driver. Abbas filed a claim with Esurance for Section B SPF No. 1 and SEF 44 benefits. Section B is for no-fault benefits suffered by an insured in an automobile accident, while SEF 44 coverage is for an insured who was injured by an uninsured driver, such that the insurer steps into the shoes of the insured.

However, Abbas admitted that he lied in the form to support his application for Section B benefits. As a result, Esurance refused to provide Abbas with either. It argued that the false statements for the Section B benefits forfeited his right to recover SEF 44 benefits.

Abbas sued the Esurance for SEF 44 benefits. Esurance sought summary dismissal of the claim. The Master dismissed Esurance’s application, ruling that it was patently unfair to deprive the insured of SEF44 benefits.

Esurance appealed, which was granted. The lower court granted summary judgment and dismissed the claim. She ruled that the insured must act in utmost good faith and Abbas’ actions were reprehensible. Abbott appealed.

The appellate court dismissed the appeal.

Common-law-fraudulent-claims rule on fraud and insurance claim still good law

In Abbas v Esurance Insurance Company of Canada, 2023 ABCA 3, the appellate court upheld the common-law-fraudulent-claims rule.

This rule states that “an insurer is relieved of the obligation to indemnify an insured for any loss arising from the same event and under the same insurance policy if the insured files a fraudulent proof of loss that is material with respect to one or more parts of the claim whether or not some part of the proof of loss is not tainted by fraud,” said the court.

In this case, Abbot’s misrepresentation in the Section B claim is both fraud and a wilfully false statement, said the court.  This misrepresentation relieves Esurance, the insurer, of the obligation to provide the insured with either Section B and SEF44 benefits, said the court.